Striving for a Bright Future

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June 11, 2015

Once people achieve financial security, they face an array of choices about how to best use their wealth, preserve it and pass it on. To make these decisions less complex, it’s helpful to think of allocating these financial goals in three categories: lifestyle, family and impact.


Lifestyle goals — relating to how you want to live and fund your daily life — form the foundation for well-being. Family goals may include paying for a wedding or establishing college funds for a grandchild, while impact covers philanthropic ambitions. If you have a vision for your wealth that considers opportunities and challenges at every stage of life, you may achieve unique aspirations in all of these areas.


20s and 30s: Establish Your Priorities

First, explore what’s most important to you and your family. At The Private Client Reserve, we take a unique approach to planning. We find out what values are most important to you, and this often makes it easier to clarify your financial objectives.


“Our process helps clients create a road map with their advisors,” says Bob Webster, National Director of Wealth Planning for The Private Client Reserve. “The discussion of values provides a great entry into discussing and establishing financial and personal goals.”


In this life stage, executives and professionals such as doctors and lawyers may be eager to upgrade their lifestyles. But they may still have substantial student loans and other debt.

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June 11, 2015

“This is a time when many will want to buy a big house and a new car,” Webster says. “We work with them to help ensure they don’t wake up 20 years later and still have too much debt.”


Before they embark on more ambitious purchases, we encourage them to tackle their debt, fully participate in tax-deferred savings vehicles such as a 401(k), set aside an emergency fund of three to six months of living expenses and ensure they have adequate insurance coverage.


40s: Think Long Term

At this stage, parents often think about saving for college. Since there are many savings vehicles to consider, parents should determine how they want to best save for their children’s education and determine whether children will have support from grandparents.


It’s important to think through your options while the children are young, as this may ensure you’re prepared for the future.

Parents are also likely to think about instilling good financial habits in their children, says Angie O’Leary, Head of Investment Solutions for U.S. Bank Wealth Management. “Building financial responsibility with the next generation is a very common concern,” she says. “Understanding the responsibility of having wealth may create good financial habits.”


Plan Ahead: Four Common Career Scenarios.


Individuals in their 40s should also consider how long they want to continue working full time. This may be a stage when entrepreneurs decide to sell a business and enjoy more freedom while they are healthy.


If they do sell, they may achieve some of their impact goals by channeling part of the proceeds into a private foundation. “They may like to control where the money is going to have a potential impact, but they also may want to pass on that charitable value within the family,” Webster says.

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If you’re meeting fundamental goals in the areas of lifestyle, family and impact, this may be a life stage when you begin to address aspirational objectives, such as buying a vacation home.


Strategies you may want to pursue in this life stage include:


  • Aligning cash flow with debt commitments
  • Seeking potentially tax-efficient investment strategies
  • Determining target retirement age
  • Focusing on retirement planning
  • Considering purchasing long-term care insurance
  • Establishing health savings accounts
  • Reviewing and updating insurance programs

50s: Protect Your Wealth

A key issue at this life stage is shielding your wealth from an array of potential risks, from identity theft to lawsuits to catastrophic medical expenses. Insurance coverage can help protect against personal liability or a court judgment.

For many people in this group, caring for aging parents also emphasizes the importance of establishing a long-term care plan that can help cover health care bills.


Many parents in their 50s become empty nesters as their children leave for college and establish their own households. Family goals such as paying for a child’s wedding may also come to the forefront. In these years, it’s time to reassess your goals in all three key categories.


“As you venture into your 50s and contemplate your lifestyle post-employment, you should have a comprehensive, holistic plan,” O’Leary says.


She suggests four components:


  1. A plan for income
  2. A plan for potential growth of invested assets
  3. Protection such as adequate property, health and life insurance
  4. A legacy plan that includes key legal documents and trusts — updated regularly
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When planning for reliable income, it’s a good idea to target one or two years of relatively liquid assets or income sources that can be accessed if needed. That may ensure that you won’t have to tap into undervalued investments to fund predictable expenses, O’Leary says.


60s and Beyond: Consider Your Legacy

If you’re making the transition to retirement, you may start to think about drawing from your assets to preserve your lifestyle.


Taxes can be a significant consideration, especially when there are large investments in tax-deferred savings, such as 401(k)s and IRAs. Another source of income that high net worth individuals may overlook is Social Security, which can be substantial — especially if you defer receiving payments until age 70.


It’s worth reviewing your options with your tax advisor and legal advisor to determine the best time to begin receiving these assets and their best use. It’s common to begin looking beyond your own finances to those of future generations.

You may be thinking about removing assets from your estate for tax purposes. For example, one of the most tax-efficient ways to pay for college may be to have a grandparent write a check to the institution directly.


This life stage also represents a time to review your estate plan with your attorney regularly. Consider updating it every few years or whenever your family experiences a significant event, such as the birth of a grandchild.


In terms of impact goals, you may be considering whether you prefer donating to a charity while you are alive or at your death. You may wish to have your attorney set up a family trust or foundation to continue your legacy.


The years after age 60 can be financially complex, even when your lifestyle is fully funded. Yet you also can make them your best.


“If you retire at 65, the next 20 years can be the most satisfying of your entire life if you plan well and have good health,” Webster says. At this stage — and at every life stage — prioritizing your lifestyle, family and impact goals can make these choices easier and more rewarding.


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Financial Planning